Pursuit of Truthiness

my gut tells me I know economics

Posts Tagged ‘taxes

When More Taxes Mean Less Government

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I am writing this while sitting in the DMV. The Department of Motor Vehicles is often used as an example of how government provides services poorly relative to the private sector. This example is used for a good reason- I would never put up with these sort of wait times if I weren’t legally required to “buy” their products, and in the private sector competition means that multi-hour waits are an extreme exception rather than the norm.

But I have yet to see people recognize that the DMV is a great example of how a single-minded obsession with cutting taxes is not the best way to shrink government. Suppose that we cut the DMV budget in half, and cut taxes accordingly. Most people would say we had just successfully shrunk the government. It would be true that the government was taking fewer literal dollars from people, and spending less on its own employees. But government didn’t really shrink- it merely changed the way it is extracting resources from the population. Instead of paying more dollars in taxes, people will spend more time in lines at the DMV- a terrible fate. The value of people’s lost time could easily exceed the tax savings.

The same idea applies to many regulations. When we went from a draft to an all-volunteer army, government spending went up, but the true size and coercive power of the government went down. We could probably avoid the distortions of the minimum wage if conservatives would embrace wage subsidies, but wage subsidies are clear examples of government spending, while the minimum wage is a hidden tax on employers. Dollars taxed and dollars spent is not a perfect measure of the size and scope of government- in fact, sometimes more taxes and spending can shrink the true size of government.

Of course, there can be other ways to shrink government too. Even better than throwing more money at the DMV so they can hire more employees would be to change the incentives of current employees. Imagine that the manager of a DMV ran a real risk of getting fired when the lines got long, and had the chance to get a bonus when wait times decreased. Private sector-style incentives could lead to private sector-style efficiency. Ideally we can do smarter government, rather than increasing spending. But maybe sometimes, smarter government means more spending, and more spending means a smaller government footprint overall.

Written by James Bailey

May 8, 2014 at 2:19 pm

Is Paying Taxes Immoral?

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The US Government is a huge organization that performs many many actions. I think almost anyone could come up with something the government does that they don’t like. I think many people could come with something the government does that is downright evil: bomb Afghan farmers, imprison innocents, pass on money to even worse governments or groups.

Given this, I am surprised that I can’t recall a single person arguing that it is immoral to pay taxes. Sure, people will grumble about losing their money or about how the government will just waste it. But no one argues that you have a moral obligation to make sure that less of your money goes to evil purposes- whether by working so little (or giving away so much) you incur no tax obligation, finding every possible loophole, or simply illegally evading paying taxes. Why not? Do you not have blood on your hands for financing the government’s murders and other evil deeds?

I avoid the force of this argument by being (or aspiring to be) utilitarian. You have to average out all the effects of paying taxes to determine the morality of it. The government does many good things and very many morally neutral things to balance out the bad. Plus avoiding all taxes would be quite costly to me, and my utility counts too.

But many people don’t think this way. They refuse to flip the switch in the trolley problem. They boycott corporations for running sweatshops, or giving money to causes they don’t like, or various other perceived evils. Shouldn’t they think paying taxes is immoral, and do what they can to avoid it?

Written by James Bailey

September 17, 2012 at 3:13 pm